Its cautious but reassuring assessment that the economy is on the verge of sustained recovery" coincided with government figures showing the Consumer Price Index rose only 0.1 percent in July, helped by moderate energy prices and declining food costs. During 1991's first seven months, inflation ran at an annual average of 2.9 percent.

Retail sales, meanwhile, rose only 0.5 percent in July after declining 0.3 percent in June -- a report that disappointed economists and demonstrated consumers' lack of confidence and spending power.

With the data indicating so few signs of economic life, the assertion of the Congressional Budget Office (CBO) that the economy will not need any more interest rate cuts surprised some economists.

One of them, Paul W. Boltz, of T. Rowe Price Associates in Baltimore, said: "We are locked into a sluggish period here, where the economy just doesn't have a lot of vim and vigor. . . . I think the Federal Reserve will ease a touch further."

The CBO's updated economic outlook and yesterday's economic figures will bring little electoral cheer to President Bush. "The economy still struggles to shed the shackles of recession," the CBO said."

Such slow growth will prevent any rapid drop in unemployment, forecast to average 7.5 percent this year and drop to an average 6.8 percent next year. It is also unlikely to spark inflation, with the consumer price index rising about 3.3 percent this year and 3.4 percent in 1993.

The 0.5 percent increase in retail sales showed that consumers are going to the malls, but the 0.2 percent decline in real earnings reflected the lack of cash in their pockets.

"We talk about consumer confidence, but the fact of the matter is the problem is not confidence. People are quite willing to spend. They just don't have the money," said David Wyss, economist with Data Resources of Boston.

The consumer's failure to spend freely is helping hold prices down. But the lack of demand and low prices are, in turn, putting a damper on production and employment.

As Mr. Wyss said: "We may not have growth, but we don't have inflation. . . . It should set the stage for growth sometime in the future, but I'm afraid it's not today's story."